Question

The chief executive officer earns $10,200 per month. As of May 31, her gross pay was $51,000. The Federal Insurance Contributions Act (FICA) tax rate for Social Security is 6.2% of the first $137,700 earned each calendar year and the Federal Insurance Contributions Act (FICA) tax rate for Medicare is 1.45% of all earnings. The current Federal Unemployment Taxes (FUTA) tax rate is 0.6%, and the State Unemployment Taxes (SUTA) tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay. What is the amount of Federal Insurance Contributions Act (FICA)-Social Security withheld from this employee for the month of June?

Answer 1

The CEO will have $632.40 withheld for the Federal Insurance Contributions Act (FICA)-Social Security tax from her monthly earnings of $10,200 for the month of June.

Step-by-step explanation:

To calculate the amount of Federal Insurance Contributions Act (FICA)-Social Security tax withheld from the CEO for the month of June, we need to apply the 6.2% tax rate to her monthly earnings. Since her monthly earnings are $10,200 and none of her year-to-date earnings exceed the Social Security cap of $137,700, the full amount is subject to the Social Security tax.

Therefore, the Social Security tax for the month of June is:

0.062 × $10,200 = $632.40.

This is the amount that will be deducted from the CEO's pay for Social Security for the month of June.